Universal credit u-turn avoids ‘cruellest benefit cut in history’

The government has side-stepped “the cruellest benefit cut in history” with the latest universal credit changes, according to the chair of the work and pensions committee.

Work and pensions secretary Amber Rudd announced on Friday that the ‘two-child limit’ in tax credits will not apply to children born before the policy was implemented in 2017.

This element of the government’s flagship welfare reform means that the child element of tax credits and universal credit is limited to the first two children in a family, and families with more children do not receive an increased entitlement.

Frank Field, chair of the work and pensions committee, said: “I strongly welcome the secretary of state’s decision not to press ahead with what could have been the cruellest benefit cut in history.

“At the eleventh hour, she has prevented thousands of children from being plunged into poverty by an unjustifiable retrospective policy.”

The Institute for Fiscal Studies calculated that by capping the number of child elements that a family can receive at two, the two-child limit reduces benefit entitlements for the typical affected family by £2,780 for every child they have beyond the second.

Changes to the reform – which rolls six separate welfare payments into one - announced by Rudd on Friday are expected to benefit around 15,000 families, according to the government.

Rudd said: “I want universal credit to gain further support as we roll it out in practice.

“This means delivering it in a way that meets the needs of claimants, who come form every conceivable background and who have incredible potential to achieve their ambitions.”

Tom Waters, research economist at the IFS, said: “[The change] tackles [issues with the] ‘retrospective’ application of the policy that had attracted criticism, and it means that the full impact of the policy will not be felt until the mid-2030s.

“But that long-run impact remains unchanged: ultimately the two-child limit will, among those families affected by it, reduce their incomes by an average of £3,000 per year.”

Rudd also announced pilot schemes to provide more frequent payments for new claimants, a new online system for private landlords and a more flexible approach to childcare provisions.

One of the issues with Universal Credit is that new claimants must wait five weeks before receiving their first payment but Field said the changes could have a “significant impact on the living standards of many families on low incomes.”

Campbell Robb, chief executive of poverty think-tank Joseph Rowntree Foundation, said: “Universal Credit has the potential to loosen the grip of poverty, and it is impossible that many of the concerns expressed by claimants have been heard.

Further Reaction:

Communities secretary James Brokenshire said: “This important change will help strengthen the choices and opportunities available for those on universal credit to secure the homes they and their families need.”

“Instead of putting the most vulnerable in society through another 12 months of misery, Rudd should end the benefits freeze immediately and fully restore the billions the Tories' cut from universal credit’s work allowance.”

Margaret Greenwood, Labour’s shadow work and pensions secretary,said:

“This partial U-turn does not go far enough. Labour has long called for the government to abandon the two child limit in its entirety.

“Universal credit simply is not working: it is pushing many families into poverty, rent arrears and towards foodbanks.

“The government must stop the roll out immediately before more people are pushed into financial hardship."

“Allowing more flexibility on the regularity of payments, and making it easier to ensure they go to the main carer in a family, should make a material difference to claimants, as should improving the processes for paying for housing and childcare.”

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